We have audited the accompanying financial statements of Killick Nixon Limited. , which comprise the Balance Sheet as at 31st March , 2013, the Statement of Profit and Loss and Cash Flow Statement for the year ended, at 31st March , 2013 and a summary of the significant accounting policies and other explanatory information.`

II. Management's Responsibility for the Financial Statements

The Company's Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ('the Act'). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

III. Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with the ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

IV. Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and subject to our reservations expressed in para V(2)(d) and V(2)(f) below, give a true and fair view in conformity with the accounting principles generally accepted in India:

a. In the case of the Balance Sheet, of the state of the affairs of the Company as at 31st March 2013.

b. In the case of the Profit and Loss Account, of the Profit for the year ended on that date; and

c. In the case of the Cash Flow Statement, of the cash flow for the year ended on that date

V. Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2003('the Order') issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by Section 227(3) of the Act, we report that:

(a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

(c) The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account.

(d) In our opinion, the Balance Sheet, Statement of Profit and Loss comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Act except for the following -

1. Adequate Provision for permanent diminution in the value of Investments has not been made as required under Accounting Standard No. 13 - 'Accounting for Investments' issued by The Institute of Chartered Accountants of India (see para V((2)(f)(i)(b) below)

2. Provision for deferred Tax asset/liability has not been made according to the requirement of Accounting Standard No. 22 - 'Accounting for Taxes on Income' issued by The Institute of Chartered Accountants of India. (See para V(2)(f)(i)(e) below);

(e) On the basis of the written representations received from the directors as on 31st March, 2013 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2013 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act.

(f) We invite attention to the followings;

(i) The company has given inter-corporate loans and advances and guarantees and made investments in other corporate bodies in excess of limits laid down under section 372A of the Companies Act, 1956 without proper compliance of the provisions of the Section.

No provision has been made in the accounts for:

a. Disputed sales tax and income tax matters aggregating to Rs. 854,137,008/- (refer to Note No. 2 (I) (b) and 2 (I) (c) of the Notes to Accounts).

b. There is a diminution in the value of investments made in Six subsidiaries and seven other companies, however the company has made a provision for diminution in value of investments aggregating to Rs. 35,741,849/- (previous year Rs. 35,741,849/-) only in respect of three subsidiary companies. Whereas as per the latest available Balance Sheets of the other subsidiaries and companies show huge negative net worth due to accumulated losses [refer to Note No24(II)]. In our opinion there is a permanent diminution in the value of the investments of other companies for which provision should have been made in accordance with the Accounting Policy of the Company and also Accounting Standard 13 issued by The Institute of Chartered Accountants of India.

c. During the Year 06-07 the Custodian had submitted Final Accounts detailing the funds raised through disposal of properties and direct remittance through bank in accordance with the decree passed by the court. The account also showed the payment made to notified parties. The payment includes principal and interest thereon at the rate prescribed by the court. In the final analysis the custodian made a claim of Rs. 1,73,50,963/- on the company. The company has not admitted the claim. The company had made independent calculation amounts payable to the notified parties. As per the calculations certified by Chartered Accountant the company has made excess payment and has filed a counter claim to the custodian. Further during the year 2011-12 company has made additional payment of Rs.78,13,206.00 to the custodian totaling to Rs. 3,3513,479.00. However the company's claim for the refund of excess money paid as principal debtor and guarantor was disallowed by the Hon'ble Supreme Court.[refer to Note No.2 (VII)].

d. The interest including Penal interest in respect of debts of Global Trust Bank, aggregating to Rs. 13,37,51,132/- (previous year Rs. 12,83,05,584/-).

e. The company has not provided for deferred tax during the year.

f. The Company has not provided for Fringe Benefit Tax (FBT) payable for the year 2008-09 amounting to Rs. 152,455/- . The interest thereon amounting to Rs. 1,61,651/- has also not been provided.

g. The Company has not made provision in the accounts in respect of interest amounting to Rs.53,145,864/- (Previous year Rs.53,145,864) on loans taken from Companies and others.

(ii) We are unable to express our opinion on the realisability or otherwise of Rs.36,46,15,772/- (previous year Rs 36,90,87,482/-) included in advance and loans to others and advances and loans to subsidiary companies.

(iii) The Company had acquired during the year 2007-08 certain shares of its 13 associate companies (all unlisted) (currently holding investments in seven associate companies) against their dues to the Company arising out of payments made to the Custodian on the account of the associate companies' debts through the sale of assets of the Company. The value agreed by the Company to acquire the shares is much higher than the book value of the shares of the associate companies. We have been informed by the Company that the associate companies hold real estate assets which are not taken at their current value in their balance sheets and hence the value paid by the Company to acquire those shares appear higher. We have also been informed that the associates are also planning restructuring and strategic alliances which will bring the actual value of their shares on record. However no substantive evidence has been brought to our notice and in its absence, we are unable to comment on the fair market value of the shares acquired.

(iv) The confirmation in respect of balance confirmation in current accounts amounting to Rs.15,97,030 and Fixed deposit amounting to Rs.2,74,865/- is not produced for our verification. Hence the finacial impact of the same, if any could not be verified.

(v) Without considering the items in Para V(2)(d)(1), V(2)(f)(i)(b), V(2)(f)(i)(e) ,V(2)(f)(ii) and V (2)(f)(iv) above, the effect of which could not be determined, had our observations in para V(2)(f)(i)(a), V(2)(f)(i)(c), V(2)(f)(i)(d), V(2)(f)(i)(f) and V(2)(f)(i)(g) above been considered, the loss for the year would have been Rs. 1,07,33,21,758/- (as against the reported profit of Rs.13,87,376/- ). Further the debit balance in Surplus Account under Reserves and Surplus at the end of the year would have been Rs. 1,52,54,53,745/- (as against the reported debit balance figure of Rs. 45,07,44,611/-), short term provisions would have been Rs. 1,07,68,93,672/- (previous year Rs. 94,26,93,445/-) as against the reported figure of Rs.21,84,538 /- (previous year Rs. 17,53,738/-)

(vi) Despite the accumulated loss, and diminution in value of assets, investments, Loans & Advances, various litigations before the Hon'ble Special Court and Debt Recovery Tribunal, overdue liabilities and taking into consideration the discontinuation of distribution agreement w.e.f. 1/5/2002 in respect of its paint products, the agreement for reimbursement of expenses having expired w.e.f. 31.10.2002, the accounts of the company have been prepared on a going concern basis. Further the company's ability to continue as a going concern would depend upon the appropriate steps taken by the management.

As required by the Companies (Auditor's Report) Order, 2003 on the basis of such checks as we considered appropriate, we state that:

i. a) The company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets upto the financial year 1993-94. From the financial year 1994-95, movements in these assets and additions thereto have not been entered in these records and we are informed that the same will be updated.

b) We have been informed that the management, during the year, physically verified most of the fixed assets. We have also been informed that no material discrepancies were noticed on such verification. However, in our opinion, and in view of the comments in para (a) above, we are unable to comment as to whether the physical verification was reasonable.

c) We are informed that during the year, the company has not disposed of any of its fixed assets.

ii. a) The Company does not hold any inventory during the above mentioned financial year.

b) In view of our comments in Para (ii) (a) above clause (ii) (b) and (ii) (c) of the said order are not applicable to the company.

a) iii a) During the year the company has granted secured or unsecured loans to the companies, firms and other related parties covered in the register maintained under section 301 of the Act amounting to Rs.20,58,872/- (P.Y. Rs.34,41,174/-)

b)

b) The loans granted to the companies, firms or other related parties covered in the register maintained under section 301 of the Act are interest free, and in our opinion terms and conditions of such loan are not prima facie prejudicial to the interest of the company. But attention is invited to para V(2)(f)(ii) of our report on even date.

d) As there is no contract in place we are unable to comment on the repayment of principal and interest. Attention is invited to para V(2)(f)(ii) of our report on even date.

e) The company has taken unsecured loans from companies, firms and other related parties covered in the register maintained under section 301 amounting to Rs.4,31,414/-( P.Y. NIL).

f) In our opinion, since loan taken from companies, firms and other related parties are interest free, terms and condition of such loan are prima facie not prejudicial to the interest of the company.

g) The repayment of principal on loans taken by the company from companies, firms and other related parties is not regular. iv. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and nature of its business with regard to purchase of inventory, fixed assets and for the sale of goods and job work receipts. During the course of our audit we have not come across any continuing failure to correct major weaknesses in internal controls.

v. According to the information, explanations and representations given to us by the management the particulars of the contract or arrangements referred to in section 301 of the Act have been entered in the register required to be maintained under that section.

vi. According to the information, explanations and representations given to us by the management the transactions made in pursuance of such contracts or arrangements have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

vii. Based on our audit procedure and as explained by the management during the year company has not accepted any deposit from the public and there are no deposits outstanding at the balance sheet date. Hence the directives issued by Reserve Bank of India and the provisions of section 58A are not applicable to the company.

Since the company has not accepted deposit from small depositors as defined under section 58 AA, defaults in repayment of deposits, compliance of section 58 AA or obtaining any order from the National Company Law Tribunal does not arise.

viii. The Company does not have an Internal Audit System.

ix. The Central Government has not prescribed maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956, for any of the products manufactured by the Company.

x. According to the information and explanations given to us, dues relating to sales tax/customs duty/wealth tax excise duty/cess that have not been deposited on account of disputes with the related authorities have been shown in the table hereunder.

x. The Company has not incurred cash loss during the current year and bit it has incurred cash losses in the immediately preceding financial year. The accumulated losses exceed the net worth of the company.

xi In our opinion and according to the information and explanations given to us, the Company has defaulted in repayment of dues to Banks, Financial Institutions and the amounts overdue are as shown in the table hereunder.

Note: The amounts mentioned are inclusive of interest wherever it has been duly accounted and excludes accrued interest not provided in the accounts and the said amounts are overdue for period of more than six months.

The Company has not obtained any borrowings by way of debentures.

xii. According to the information and explanation given to us and based on our examination of documents and records, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii. The Company is not a chit fund or nidhi / mutual benefit fund / society. Therefore the provisions of clause 4(xiii) of the order are not applicable to the company.

xiv. According to the information and explanations given to us the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of the Order are not applicable to the company.

xv. According to the information and explanations given to us and the representations made by the Management, the Company has given guarantees to Banks or financial Institutions for loans taken by another company in earlier years. In our opinion, the terms and conditions of these continuing guarantees are, at present, prima facie, prejudicial to the interest of the company.

xvi. During the year under audit company has not taken any term loan. According to information and explanation given to us the term loans taken earlier have been applied for the purpose for which they were obtained.

xvii. Based on the information and explanations given to us and on an overall examination of the balance sheet of the company in our opinion, there are no funds raised on short term basis which have been used for long term investment.

xviii. According to the information and explanations given to us, no preferential allotment of shares has been made during the year by the Company to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956.

xix. According to the information and explanations given to us, no debentures have been issued by the Company during the year. xx. Based on our examination of books and records of the Company, no public issue was made by the Company during the year. xxi. During the course of our examination of the books of account carried out in accordance with the generally accepted auditing practices in India, we have not come across any instance of fraud on or by the Company nor have we been informed by the management of any such instance being noticed or reported during the year.

                                   For NBS & Co.

                                   Chartered Accountants 

                                   Sd/-

                                   Devdas Bhat

                                   Partner

                                   M. No. 48094

Dated: 2nd September, 2013